Quest for New AI Chip Architectures Fuels an Already Heated Semiconductor Market

Main idea: The historically cyclical semiconductor sector has been on a growth tear due to COVID related supply chain disruptions with over 20% growth projected for 2021. AI is one of the key drivers for the next decade of semiconductor market growth as algorithmic innovations and key use cases such as autonomous vehicles create the need for new chip architectures. A new ecosystem of well funded AI hardware startups has emerged to address this white space as supply chain and geopolitical risks are reshaping the semiconductor manufacturing landscape.

What it means: Adoption of semiconductor chips architectures for emerging technologies involves tradeoffs across factors such as performance, on chip memory, programmability, power consumption and cost. Graphical Processing Units(GPUs) have been the architecture of choice for AI applications followed by Central Processing Units(CPUs). However, the compute and data movement requirements for large language models with trillion parameters and the unique requirements for automotive and IoT use cases are not fully addressed by the existing architectures.

Industry trends: Recent semiconductor supply chain disruptions are estimated to have shaved off 1% of US GDP and geopolitical risk is starting to fundamentally alter the traditional manufacturing approach for US companies- "Fabless" companies designed chips that were manufactured overseas by the consistently innovative TSMC. The Chips Act, currently working its way through the US Congress, is an attempt to ramp up R&D and manufacturing in the US and investments in US fabs are already starting to happen. Other nations are following similar approaches.

What you should watch out for:

• Winners and losers from the AI Chip unicorns in the coming years as the architectures of choice emerge

• Moves by incumbents such as Nvidia, Intel and AMD as they assess their build vs buy strategies

• Accelerated demand for semiconductor talent, which until recently had been overshadowed by the software sector

• Continuing strategic investments by various countries on their national semiconductor capabilities

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